The demand for gummy bears is given by
Q = 200 – 100P
and these confections can be produced at a constant marginal cost of $0.50.
a. How much will Sweet tooth, Inc., be willing to pay in bribes to obtain a monopoly concession from the government for gummy bear production?
b. Do the bribes represent a welfare cost from rent seeking?
c. What is the welfare cost of this rent-seeking activity?